(Alliance News) - Hipgnosis Songs Fund Ltd on Tuesday said its investment adviser, Hipgnosis Songs Management Ltd, has refused its request to drop the call option from its investment advisory agreement.
The London-based investor in music rights said it had requested its investment adviser, which is majority owned by funds managed or advised by Blackstone, to "unconditionally remove" the call option from its agreement.
It said 29 catalogues proposed to be sold to Hipgnosis Songs Capital, a fund also managed by the investment adviser, were growing at "materially higher rates to the overall portfolio" and were therefore "cherry picked" for sale to Hipgnosis Songs Capital.
"The newly constituted board is investigating whether this is the case, and if so, whether this was properly and fully disclosed to the previous board in the investment papers, which included the recommendation provided by Hipgnosis Song Management, and therefore whether the previous board were provided with the relevant information to enable them to make a decision in the best interests of shareholders," it said.
This comes after Hipgnosis Songs Fund last week called for an extraordinary general meeting of shareholders to approve a proposal to compensate potential bidders for the fund's assets.
The board wants to be able pay a fee of up to GBP20 million to prospective buyers offering terms recommendable to shareholders by the board. The fee is intended to protect bidders against due diligence and acquisition costs so that they are "not deterred from seeking to engage with company" over a possible offer.
The concern that bidders may be deterred is due to the call option over the fund's assets that is held by Hipgnosis Song Management, giving the adviser the right to buy the fund's portfolio upon termination of its investment advisory agreement with the fund.
The move by the fund's reconstituted board followed a shareholder revolt over an agreement, since rejected, to sell the portfolio of 29 music catalogues for USD440 million in cash to Hipgnosis Songs Capital.
Shares in Hipgnosis Songs Fund fell 0.3% to 72.00 pence each in London on Tuesday morning.
By Sabrina Penty, Alliance News reporter
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Hipgnosis Song. (SONG)